A company is considering whether or not to purchase a piece of factory equipment for AU$500,000. The
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A company is considering whether or not to purchase a piece of factory equipment for AU\$500,000. The equipment would last three years, is expected to generate AU\$200,000 of additional annual profit over that period, and can be sold for scrap at the end of the third year for AU \(\$ 20,000\). What is the present value of this investment if the interest rate is \(10 \%\) ? Should the company purchase the equipment? Should it buy the equipment if the interest rate is \(12 \%\) ?
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